Illegal vs. non-conforming unit: differences in uses & Airbnb?

8 Replies | Chicago, Illinois

This is a few related questions in one:

First, I want to check if my understanding on the differences here is correct?

Illegal unit = you can't rent this unit.  I mean, you *can* rent it, but if the City is ever alerted to it you could get in trouble and have to deconvert the unit

Non-conforming unit = you CAN rent this unit.  It was there before certain ordinances were in place, so it's "legal" in a sense.  However, your building's zoning certificate will not include this unit.  You're good to go *as long as* you never try to make a change to the existing property on a certain scale that would alter its use significantly.  This change would invalidate your grandfathered status and you would revert to the certified level of zoning, thus losing your "extra" unit.  Good so far?

Question 1:  WHAT TYPES of changes to the structure kills your unit's non-conforming status?  Can I move a few internal walls around?  Replace the front steps?  Put up a new back porch?  Can I do anything like this and still retain the non-conforming status?  

Question 2:  how does all this factor into an Airbnb rental?  I've heard rumors that you can do Airbnb with even an illegal unit no problem.  I know there's some registration process with the City to be listed on Airbnb.  Is part of that a zoning check to see if, let's say, that garden unit you have listed is illegal or not?  What about non-conforming?

Thanks!

Legal non conforming will show as a unit on zoning doc. My building was built in 1960 with one exit per a unit they all are non-conforming but on zoning doc legal 4. The only risks with these type of buildings is complications to re-building in a total loss fire etc. through insurance. No issues with airbnb on these. You only have issue if total loss fire or if you do a full gut rehab moving around walls but even then you can usually rebuild same number of units as was on doc its just going to have to be up to the new codes. For example one of my clients gut rehabbed a legal 3 unit where one of units was a one egress attic and city let them rebuild as 3 units but add a second entrance to attic apartment and make up to todays codes.

Be careful a lot of shady brokers call illegal units as non conforming this is not true. If the unit is not on zoning doc its illegal no matter what anyone tells you. 

@Henry Lazerow - thank you!  So, basically it sounds like the most critical piece of info to have when purchasing would be that the zoning cert matches the units you have.  Does the non-conforming aspect of one of the units use some sort of specific language on the zoning cert, so I can at least know it's non-conforming vs. just being regularly conforming?  

Also, to your last point about the shadiness of what people will tell you - I have heard horror stories about that.  Is the only way to really check this to wait until the closing process?  I think I heard that only the current owner or his attorney can request the zoning cert which of course is needed for the actual closing.  I've heard of last second surprises where they try to just get the buyer to go along with it since it's so far already in the process.  That sounds like a nightmare I'd like to avoid!

I like to discuss zoning upfront to make sure everyone is on the same page since yes it typically does not come until later in the deal. I rarely have zoning be an issue as typically know in advanced what the doc is likely going to say. Regardless, you will have your attorney put a contingency in for x units on zoning doc for your protection.

@Henry Lazerow - awesome I like that plan and especially the contingency!  Let's them know not to screw with you or else waste their own time as well.  

Have you ever registered a unit with the City for Airbnb?  Do you know if they check the zoning at all to make sure it's not an "illegal" unit?

@Nate Grabner - mostly what I learned are what people answered here.  I've started making it clear with my agent to talk to the other agent and let them know I'm going to absolutely need to know the zoning status if we move forward, so it kind of seems to get it in their heads that I'm not an uninformed buyer. 

Aside from that, about the Airbnb thing, I still feel slightly nervous about it, but I did get confirmation from a few people who had Airbnb's successfully up and renting that the City did not in fact ever pay them a visit.  I feel like that can change potentially at any point, you never know what the City will come up with later on.  I will probably avoid any deals where I NEED that extra space to rent to be profitable

@Ryan Monty this is such a complicated issue and I run into it all the time. One of the biggest problems is that the suburbs closest to the city area all much, much stricter on non conforming and also illegal non conforming units. In the city, you are generally fine with non conforming. In the suburbs, make sure the seller has done any pre sale inspections so you have the cities take on this. Do NOT ever take the listing agent's word for any of this as @Henry Lazerow mentioned.